HQ 0544493 - Application for Further Review of Protest No. XX; Regarding Assists Provided in the Manufacturing of Wiring Devices - United States International Trade Commision Rulings

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HQ 544493

June 3, 1991

VAL CO:R:C:V 544493 ML

CATEGORY: VALUATION

District Director
Laredo, Tx 78044

RE: Application for Further Review of Protest No. XX; Regarding Assists Provided in the Manufacturing of Wiring Devices

Dear Sir:

This application for further review of the subject protest was filed against your decision in the liquidation of various entries made by General Electric Company. The merchandise was manufactured in Mexico by their wholly-owned subsidiary, Apparatus Electricos de Acuna. The imported merchandise was appraised pursuant to section 402(e) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C.

FACTS:

The General Electric Company (hereinafter referred to as the "importer"), imported various wiring devices, such as, small switches, fuses, dimmers, connectors, cordsets, lampholders, etc. The merchandise was manufactured in Mexico by their wholly-owned subsidiary, Apparatus Electricos de Acuna (hereinafter referred to as the "manufacturer"). The importer furnished the manufacturer with component parts and materials, free of charge, for incorporation into the imported merchandise. Some of the imported merchandise qualified for duty free treatment under former item 807.00, Tariff Schedules of the United States (TSUS), while some did not.

Much of the imported merchandise was appraised at the end of accounting periods on the basis of cost submissions furnished to the import specialist. The cost submission detailed the costs of all assists provided by the importer to the manufacturer. Customs later determined the amount of additional duty or duty refund on a per entry basis. Counsel for the importer states that Customs has, at times along the Mexican border, allocated the entire increase or decrease, as a lump sum or sums against one or a few entries, and not pro-rata against each entry. This procedure, states counsel, was invoked where the majority of the entries covered by the cost submissions had already been liquidated.

In 1982, cost submissions were submitted to Customs and the records of both the importer and the manufacturer were audited. Customs determined a dutiable value for the Calendar Year 1982 importations which would result in a duty refund to the importer of $XXXXX. The importer alleges that a quantity of material provided by the importer to the manufacturer was "scrap", and as such, should not be included in the dutiable value of the assist.

ISSUE:

(1) Whether evidence has been furnished by the importer which establishes that materials provided to the manufacturer are not assists because they have not been incorporated in the imported merchandise.

(2) Whether proper duty refunds were made in connection with the appraisement and liquidation of various entries made in 1982.

LAW AND ANALYSIS:

Computed value is defined in section 402(e) of the TAA as the sum of:

(A) the cost or value of the materials and the fabrication and other processing of any kind employed in the production of the imported merchandise;

(B) an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by the producers in the country of exportation for export to the United States;

(C) any assist, if its value is not included under subparagraph (A) or (B); and

(D) the packing costs.

The definition of an assist (in pertinent parts) is as follows:

The term "assist" means any of the following if supplied directly or indirectly, and free of charge or at reduced cost, by the buyer of the imported merchandise for use in connection with the production or the sale for export to the United States of the merchandise:...

(i) Materials, components, parts, and similar items incorporated in the imported merchandise....

(iii) Merchandise consumed in the production of the imported merchandise....

The protestant argues that the appraisement for the Calendar Year 1982 importations treated as dutiable a quantity of "scrap" from material provided by it, free of charge and which was not incorporated in the imported merchandise. The protestant notes that Headquarters Ruling Letter (HRL) No. 543093 dated April 30, 1984, stated the following:

...components which are destroyed, scrapped, or lost, and which are not physically incorporated into the imported article are not assists under the TAA.

The importer argues, therefore, that the import specialist erred in treating the "scrap" as a dutiable cost. If this were the issue presented, we might be able to agree that discarded component parts and materials that have some commercial value (i.e., scrap) do not constitute an assist if they are not incorporated into the final imported merchandise. This material would, therefore, be nondutiable. However, in the instant case, no evidence has been submitted suggesting that the additional components supplied by the importer to the manufacturer were not incorporated in the imported merchandise. As the importer has not supplied any evidence to negate the import specialist's having made the appropriate adjustments to appraised value, we find that the components incorporated in the imported merchandise were dutiable assists. As Customs stated in Headquarters Ruling Letter No. 543995, if no evidence is submitted in support of a protestant's argument, then we have no basis for holding that an appraisement was in error. (See HRL 543995, dated February 17, 1988)

The second issue involves the appraisement and liquidation of various Calendar Year 1982 entries. These entries were appraised and liquidated per information provided by the importers cost report. The protestant contends that section 504(b)(1) of the Tariff Act of 1930, as amended (19 U.S.C. 1504(b)(1)), requires the import specialist to suspend liquidation since Customs had determined to audit the entries concerned. He states that Customs knew that further information was needed for the proper appraisement and was not available, therefore, the Customs officer involved should have invoked the procedures in section 504.

Section 504(a) states (in pertinent part):

"the entry of merchandise not liquidated within one year...shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted at the time of entry by the importer, his consignee, or agent. Notwithstanding section 500(e) of this title, notice of liquidation need not be given of an entry deemed liquidated."

As cited by the protestant, section 504(b) states that the "Secretary may extend the period in which to liquidate an entry by giving notice ...if-

(1) information needed for the proper appraisement or classification of the merchandise is not available to the appropriate Customs officer;" (emphasis added)

As no relief was requested by the importer at the time his cost information was presented for these entries, they were automatically liquidated. Customs was under no obligation to notify the importer, and so their decision to liquidate the entries was not inconsistent with statutory requirements.

HOLDING:

In view of the foregoing, we have no basis for holding that the appraisement was in error. As Customs is not obligated to notify the importer of their decision to liquidate entries that have been held open for a period of time greater than one year, Customs did not violate the procedures in section 504 as they apply to the liquidation of entered merchandise.

Accordingly, you are directed to deny this protest. A copy of this decision should be attached to Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director

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